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Matching Your Sentiment to Your Strategy

What I have learned is that subscribers come in various flavors. There are those that purchase large share lots, while others establish more modest positions. There is also a range in how people view their portfolios. Are they in growth and accumulation phases or are they seeking to increase income streams? Subscribers also differ in risk aversion levels.

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Modifying a Covered Call Strategy for a Bull Market﻿ is a variant covered call strategy that is especially helpful for investors that routinely have in excess of 200 shares of a position. Although it is particularly well suited for bull markets, in that it offers greater opportunity to capitalize on capital gains from shares, it also offers all a means to reduce trading costs, especially those incurred in “rollover” trades. While “rollover” trades won’t disappear, make room for “roll forward” trades.

The Role of Puts in Enhancing a Conservatively Managed Portfolio is for the more conservative investor who has some trepidation when share prices retreat and is more focused on maintaining a steady stream of premium income, whether share prices are falling or rising. It is also well suited for bull markets for those individuals that particularly require a higher degree of confidence that their assets will be better protected.﻿

The new strategies that are introduced in these articles are the AC/DC strategy and the Split Option Strategy (SOS).

The AC/DC Strategy is suited for Individuals focused on asset accumulation. They may select to use their funds to purchase shares and then sell calls on all or a portion of the shares.

In instances when calls are sold only on a portion of shares, the need to rollover contracts will be decreased, thereby reducing trading costs, as well as the costs associated with the BTC transactions. Instead of rolling over contracts they would be rolled forward. That is the uncovered shares would then have contracts written on them for the coming option cycle, allowing the covered positions to either expire, be assigned or rolled over in the traditional fashion.﻿

An individual focused on income streams may elect to commit all of their attention to the purchase of stock and subsequent sale of calls or use the Split Option Strategy and split the transaction and purchase fewer shares, while concomitantly selling both puts and calls. Doing so will reduce total income stream because the comparative premium from the sale of puts will be lower than that of call sales, but there is less downside risk if shares do drop in value.

For example, when a share’s price is near or above the strike price, individuals that roll their positions forward will have a higher ROI than those that rollover contracts by simple virtue of not having to buy back contracts.They will also experience greater gains during a sustained bull market or rise in share price.

In the case of decreasing stock price those that used the Split Option Strategy will likely have a higher ROI.

The challenge of transmitting more highly refined Trading Alerts and for individuals to decide which variation of the strategy may be most appropriate for their own situation should be easily resolved. While I have tried to portray returns of OTP positions accurately in order to reflect what subscribers may experience, it was based on a one size fits all approach. A more intriguing challenge will be in the reporting of performance statistics and the potential for a disconnect between my personal trading and that of Trading Alerts, in that I may or may not execute all of the available hedging options, consistent with my own needs and temperament, although I will always continue to purchase the underlying security and hedge holdings in some proportion and manner.